Case of the Day: Animal Science Products v. Hebei Welcome

Posted on June 15, 2018

The case was a class action brought by purchasers of vitamin C against four Chinese manufacturers of the product, claiming they had agreed to fix the price of the product and thus violated the Sherman Act. The defendants moved to dismiss on the grounds that Chinese law required them to fix the price, and thus that they could not be liable under doctrines such as the act of state doctrine. In the District Court, the Chinese government submitted an amicus brief agreeing with the Chinese firms and stating that it had required them to adhere to a price regime. But the plaintiffs argued that the Chinese government had not identified any particular provision of Chinese law that supported its view and that China had apparently announced that it was not going to intervene in the market. The District Court denied the manufacturers’ motion to dismiss, holding that the Chinese government’s statements about its own laws were not conclusive on the question. The antitrust case was tried to a jury, which returned a verdict for the plaintiffs and which specifically found that the defendants had not been “actually compelled” by the Chinese government to fix the price of the vitamin. The court entered a judgment on the verdict for $147 million, and it enjoined further violations of the Sherman Act. On appeal, the Second Circuit reversed. While it recognized that the courts were not unanimous on the question, it held that “When a foreign government, acting through counsel or otherwise, directly participates in U.S. court proceedings by providing a [statement] regarding the construction and effect of [the foreign government’s] laws and regulations, which is reasonable under the circumstances presented, a U.S. court is bound to defer to those statements.”

The Supreme Court took the case to resolve the split among the circuits about the deference required to a foreign government’s statement of its own law. In a unanimous decision written by Justice Ginsburg, the Court vacated the Second Circuit’s judgment and remanded the case for further consideration.

The Court adopted what I think is the right rule. First, when a foreign government gives its view, “In the spirit of ‘international comity,’ a federal court should carefully consider a foreign state’s view about the meaning of its own laws.” But the court is not bound by the foreign court’s view, nor need it ignore other relevant materials, any more than a federal court is bound by a (US) state government’s statement about its own law.

Interestingly, the Court cited international sources in support of its conclusion, namely, the European Convention on Information on Foreign Law and the Inter-American Convention on Proof of and Information on Foreign Law. This is noteworthy because the United States is not a party to either convention, yet the court found the practice of other states instructive. A promising sign.